Kiplinger’s posted an interesting article ranking taxpayers according to their 2008 AGI. The graphic they show isn’t clear so I’m assuming that their numbers are for the married filing jointly status. Here is a cut out of that graphic:
Just to see where we stood, I dug out our 2008 income tax return. According to our numbers, we rank in the top 10%. Although I feel blessed to be where we are, I’m discouraged because we don’t feel “rich.”
The article mentioned that the top one percent of taxpayers made 20% of the income of the U.S., while the bottom fifty percent of taxpayers only made 12.75% of the nation’s income. The article compares those numbers to 1986:
For historical perspective, back in 1986, the top 1% of earners reported 11% of all income and paid 26% of the income taxes; the lower-earning 50% made 17% of the income and paid 6% of the nation’s individual income tax bill.
Let’s think for a minute why those numbers could have changed (a little “what-if” thinking here)…
• People (Baby Boomers) are retiring and are therefore making less money than in the past.
• Lower income means lower income taxes.
• Tax rates dropped across the board. Those in the lower income tax bracket dropped 67% (from 15% to 10%). The tax brakets at the upper end dropped, but not as much based on percent.
• The U.S. has moved from manufacturing jobs to service jobs, where pay may not be as high. A lot of those manufacturing jobs were high-paying union jobs.
• White collar/management positions have continued to pay well due to supply and demand (and some might say corporate greed). Consider the field of engineering.
• The U.S. has adopted policies that have given more and more to those in the lower income classes in the form of income tax credits. I read somewhere (and even posted about it once) that something like 47% of Americans don’t even pay income taxes.
I think if we want to reverse the gap trend, then we need to help people get higher-paying jobs, rather than drag down those who have higher-payiing jobs. In other words, we get nowhere in the longrun by wealth redistribution. Real wealth comes from building and creating things.
I know this post is probably going to garner some comments. Some of you will agree with me while others of you won’t. I’m looking forward to a great discussion (without name-calling or other rude behavior).